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THE IMPACT OF AGRICULTURAL COOPERATIVES ON AGRICULTURAL MARKETING: TAIWAN'S EXPERIENCE


Chen, Cheng-Wei
National Taiwan University, Associate Professor 
No. 1, Roosevelt Rt., Sec. 4, Taipei 10617, Taiwan
Email: cwchen@ntu.edu.tw


ABSTRACT

The paper will discuss the relationship between agricultural cooperatives and marketing of agricultural products.

In 1981, the Taiwan government passed the Agricultural Products Market Transaction Act (2012.11.28) to help setting agricultural marketing channel that is from farmers to agricultural products wholesales market then to retailer to consumers.  The Act has two main parts: joint marketing and wholesale market.

Original agricultural marketing channel is from farmers through middlemen shipping to consumers. The middlemen with market information could influence the market.

There are so many agricultural products in Taiwan, vegetables, fruits, livestock, fish, etc.  For simplicity, the paper focuses on vegetables and fruits as examples.

Pursuant to the Cooperative Act, a cooperative needs to register at the Ministry of Interior.


Keywords: Joint Marketing, Agricultural Cooperative, Cooperation Group, Farmers’ Association

INTRODUCTION

Taiwan has an island space of about 3,618,995 hectares.  Around 27.11% of Taiwan is made up of plains totaling about 981,144has. Twenty seven percent of Taiwan is hilly, about 981,424ha, and the remaining 45.77% is mountainous.  Cropland is about 799,611ha (22.21%) most of them are located in the western part of the island. Taiwan has 23 million people, two million of whom are farmers.  According to the Council of Agriculture statistics, it has 780,000 farm families in 2014. The average cropland space per farm family is less than one hectare, which is considered a small-scale farm. Cooperation for farmers is very important. Most farmlands are located in the middle and southern parts of Taiwan. Seventy percent of people live in five main city areas. Since production area is in the south, transporting agricultural products to the city area is an important agricultural marketing channel. Original agricultural marketing channel is from farmer (producer) through middlemen shipping to consumers. The middlemen with market information could influence the market.

In 1981, the Taiwan government passed the Agricultural Products Market Transaction Act (2012.11.28) to help set up the agricultural marketing channel which is from farmers to agricultural products wholesale market then to retailers and consumers.  The Act has two main parts: joint marketing and wholesale market.  The first is to make sure that supply for market is to help farmers to sell their agricultural products in the wholesale market.  The members of the wholesale market collects agricultural products, and then distributes to the consumers by shippers and retailers.  By mandate, the wholesale market needs to deal with joint marketing agricultural products first to make sure those agricultural products are shipped by joint marketing.

Joint marketing according to the Agricultural Products Market Transaction Act Article 7: Agricultural products marketing may be joint marketing performed by farmers’ organizations, in two forms: First, wholesale of supply and reselling or processing as purpose; Secondly, retails of supply to consumers as purpose; The aforesaid operates in a way that the agricultural products or areas may be performed by joint marketing through farmers’ organizations, and it can also be performed by the farmers themselves.
 

Regarding the agricultural product wholesale market, the Agricultural Products Market Transaction Act Article 12 states:

Agricultural product wholesale markets are public utilities, their establishment and items of business matters should be proposed by competent authorities, and registered as budgets for subsidy.  The aforesaid project proposed by local competent authorities, would be decided upon the merits of the case by central competent authority.

Pursuant to Cooperatives Act (2011.06.15) Article 2 and 2-1: First, the regulating authorities of cooperatives refer to the Ministry of the Interior at the central level, the municipal governments at the municipal level, and the county (city) governments at the county (city) level. However, the target businesses of cooperatives shall be directed and supervised by the regulating authorities in charge of the target businesses.  Obviously, the Ministry of the Interior is different from the Council of Agriculture.  It may raise some problems about performance of agricultural products and joint marketing.

This paper discusses the relationship between agricultural cooperatives and agricultural products marketing. To review the Taiwan’s experience some improving affairs for agricultural marketing in the future are mentioned.

Joint marketing of agricultural products, vegetables and fruits

In 1982, the Taiwan government passed the Agricultural Products Market Transaction Act to set up the agricultural marketing channel, from farmers through agricultural products wholesale market then wholesaler retailer to consumers. It prevents farmers from middlemen to sell their agricultural products in agricultural product wholesale market by joint marketing of farmers’ associations, or agricultural cooperatives. Table 1 shows the 1993-2014 joint marketing of vegetables and fruits and the annual percentage of agricultural product wholesale market transactions.

In 1982, Agricultural Products Transaction Act was passed. Eleven years later, in 1993, joint marketing vegetables with 211,796 tons was 0.095% of the total agricultural products wholesale market transactions. For fruits 137,509 tons was 0.0617% of the total transactions.  Both percentages are less than one-tenth.

From 1993 to 2014 fruits and vegetables transactions of agricultural products in wholesale markets was around 2,300,000 tons.  The highest was 2,542,240 tons in 2002, and the lowest with 2,152,471 tons in 2005.  The trend of total transactions seemed stable keeping around two million tons annually.  For vegetables, joint marketing was successful from 211,796 tons (0.095) in 1993 increasing continuously to 464,956 ton (0.1838) in 2014 over two times as amount and percentage.

 

Table 1. 1993-2014 joint marketing of vegetables and fruits and the percentage of agricultural products wholesale markets

  
    Source: Taiwan Area Agricultural Products Wholesale Market Yearbook 2015.    


However, the joint marketing for fruits seemed not so well. From 137,509 tons (0.0617) in 1993, it increased a little to 185856 tons (0.0735) in 2014.  Almost the same as the beginning in 1993, there was 1.18% difference in 22 years. As Agricultural Product Market Transaction Act, joint marketing may be performed by farmers’ organizations. Tables 2 and 3 show three main farmers’ organizations performing separate joint marketing. 

From Table 2, National Farmers’ Association and Agricultural Production Cooperative were the major organizations that did performing joint marketing of vegetables.  Both occupied about 40% of the total amount of joint marketing vegetables. The third organization, R. O. C. Fruits & Vegetables Cooperative performed less amount of joint marketing vegetables.  However, the amount and the percentage are from 20,584 tons to 66,673 tons and 7% to 14% respectively.  

Table 2. 2004-2014 joint marketing vegetables by three main organizations
                                                                                                                                                         

Source: Taiwan Area Agricultural Products Wholesale Market Yearbook, 2015


For fruit joint marketing, the situation was similar to vegetables.  The National Farmer’s Association and Agricultural Production Cooperative, kept the same amount and percentage as the amount around 110,000 tons and 40,000 tons, and the percentage around 60% and 22% respectively.  Furthermore, the R. O. C. Fruit and Vegetable Cooperative had similar situations. The amount is from 9,515 tons to 20,572 tons as the percentage was from 5% to 11%.  Both of them increased twice in terms of amount and percentage.  Remarkably, there was the fourth main farmer organization to perform fruit joint marketing, named the Taiwan Fruit Marketing Cooperative.  It concentrated about 10% and was similar to the National Farmers’ Association and Agricultural Production Cooperative, the amount and percentage both were the same from 2004 to 2014.


Table 3.  Joint marketing fruits by three main organizations

    
Source: Agriculture and Food Agency, Council of Agriculture, Executive Yuan, Taiwan.
     
Table 4 is shows supplier of joint marketing for vegetables and fruits. Obviously, the number of suppliers will influence the amount of vegetables and fruits in joint marketing. Suppliers may overlap in between those farmer organizations.


Table 4.  Supplier of joint marketing of three main organizations
 

Source: National Farmers' Association, Republic of China Fruit & Vegetable Cooperative, and Agricultural Production Cooperatives.


Agricultural cooperatives in Taiwan

Pursuant to Cooperative Act, a cooperative needs to register in the Ministry of the Interior.  There are five different types of agricultural cooperatives: production, marketing, labor, supply, and producers’ utility in single-purpose agricultural cooperatives. Another agricultural marketing related cooperative is the cooperative farm.  Concerning agricultural marketing, production cooperative, marketing cooperative, and cooperative farm are the paper’s interest.  Table 5 shows the number and membership of agricultural cooperatives in 2013.  There are a total 983 agricultural cooperatives and 225 cooperative farms, 1,208 units cooperatives and federations.  For membership, there are 169,044 persons, agricultural cooperatives with 148,868 persons and cooperative farms with 20,176 persons.  At the time, there are a total of 1,564 legal persons, agricultural cooperatives with 1,537 legal persons and cooperative farms with 27 legal persons. 

 

Table 5.  Number and membership of agricultural cooperatives, 2013


Source: Cooperative Enterprise Yearbook, 2014
    

Table 6 shows the number and membership of agricultural production cooperatives from 2003 to 2013.  The number of agricultural production cooperatives was 287 in 2003 and 664 in 2013, increasing almost two and half times. The membership of agricultural production cooperatives, the number of cooperatives was 184 in 2003 and 644 in 2013, increasing about three and half times.  However, the membership totals 68,693 in 2003 and decreased to 61,571 in 2013.  Therefore, the average persons per cooperative is 373 in 2003 which shrunk to 96 persons per cooperative in 2013. 

 

Table 6. Number & membership of agricultural production cooperatives
    

Source: Cooperative Enterprise Yearbook, 2014


Table 7 shows number and membership of marketing cooperatives from 2003 to 2013.  The number of marketing cooperatives was 134 in 2003 and 328 in 2013, an increase of more than twice. Regarding the membership of marketing cooperatives, the number of cooperatives was 485 in 2003 and 893 in 2013.  There was no available data in 2004 but in 2005, an outliner of 80 was recovered.   It seems the data is not precise in two years.  The person per cooperative is 208 (100,858/485) in 2003 and 105 (93,370/893) in 2013, the amount almost half of 208.

 

Table 7.  2003-2013 Number and membership of marketing cooperatives

    

Source: Cooperative Enterprise Yearbook, 2014
    

Since agricultural cooperatives are spread to the whole country the location of agricultural cooperatives would be located in agricultural areas. Table 8 shows the number and membership of cooperative farms by locality. Yunlin H. with 64 cooperative farms as the most number in Taiwan.  It is one of the important vegetable production areas.  Kaohsiung C. with 27 cooperative farms, Taoyuan H. (now it is City) with 36 cooperative farms, and Nantou H. with 27 cooperative farms.  They are considered as the main fruit production areas in Taiwan.  Therefore, all of them have more membership with more people comparing with other areas in Taiwan.


Table 8.  Number and membership of cooperative farms by locality in 2013

    
Source: Cooperative Enterprise Yearbook, 2014
     

Table 9 shows the number and membership of cooperatives farms from 1990 to 2013.  The number of cooperative farms was around 200, not much change in two decades.  The membership of cooperative farms was around 20,000 members, a stable number from 1990 to 2013.  The membership of cooperative farms, was 21,809 members in 1990 and 20,176 members in 2013, not much different from 1990 to 2013.  However, the person per farm is 217 (21,809/85) in 1990, and 747 (20,176/27) in 2013, increasing three times (747/217) in 24 years 1990 to 2013. 

 

Table 9. 1990-2013 Number and membership of cooperative farms


Source: Cooperative Enterprise Yearbook, 2014
    

Pursuant to Cooperative Act Article 3, there are three kinds of agricultural cooperatives, -production, marketing and cooperative farms.  Agricultural production and marketing cooperatives are single-purpose agricultural cooperatives. The number and membership of cooperative farms in 2013 are almost the same as the production and marketing cooperative in 1990.  Since there is any data concerning agricultural marketing amount of vegetables or fruits, it is difficult to judge which kind of cooperative had better performance in terms of marketing.  Even though, marketing cooperatives are not necessary better in terms of performance or marketing than production cooperatives.

The role of government in agricultural marketing

There are so many agricultural products in Taiwan, vegetables, fruits, livestock, fish, etc.  For simplicity, this paper focuses on vegetables and fruits as examples.  In 2015, the Taiwan Area Agricultural Products Wholesale Market Yearbook, it was reported that in order to improve vegetable marketing system, Taiwan government had assisted and guided farmer organizations to carry out cooperative marketing programs for shipping vegetables to the wholesale markets in major consumption areas since June 1973.  After the inauguration of the Taiwan Fruits and Vegetables Marketing Corporation (renamed as Taipei Agricultural Product Corporation in June 1984), amount of marketing cooperative vegetables and fruits increased annually as the Agricultural Products Market Transaction Act was passed in 1982.

The government had made lots of efforts to improve the transaction practices for vegetables and fruits, to assist cooperation group farmers in building assembling lots, purchasing equipment, as well as developing better grading and packaging methods financially.  Hence, cooperative marketing has been widely adopted by the producers in major vegetable production areas.  There are four main farmers’ organizations, the National Farmers’ Association, the Agricultural Production Cooperatives, the Republic of China Fruits and Vegetables Cooperative (as mentioned above), and the Taiwan Fruit Marketing Cooperative.  Their suppliers totals more than 500 units.  Table 1 shows that there were 464,956 tons in the amount of joint markets by farmer cooperatives in 2014.  There were 344,895 tons (74.2%) shipped to the Taipei Agricultural Products Wholesale Market, 19,329 tons (4.2%) to the Kaohsiung Agricultural Products Wholesale Market, the rest 100,732 tons (21.6%) to the other agricultural products wholesale markets.

As the report reveals, it seems the government did a good job in agricultural marketing.   However. It is not fair enough to say that.  First, the total annual transaction is 2,529,361 tons of vegetables and fruits in 2014.  It is only 18.4% vegetable cooperative marketing by joint marketing.  As shown in Table 2, why are the National Farmers’ Association and the Agricultural Production Cooperatives are having the same percentage, even though the volumes increased a little from 2004 to 2014?  Further research is needed to figure out solutions.  The other is the cooperative (joint) marketing volumes concentrated on the Taipei Agricultural Products Wholesale Market heavily.  It may cause farmer organizations to lose bargaining power and competition. 

The cooperative fruit marketing system was initiated in 1974, one year later than vegetables.  As shown in Table 1, the volumes of fruit joint marketing was from 137,509 tons in 1993 increased to 185,856 tons in 2014, only 48,347 tons difference.  The worse situation of fruits cooperative marketing, was only 7.4% (185,856/2,529,361) of the total vegetables and fruits transaction in 2014.  There were four main farmer organizations that performed fruit cooperative marketing as shown above.  There were 129,747 tons (69.8%) shipped to the Taipei Agricultural Product Wholesale Market, 47,730 tons (25.7%) to the New Taipei City Agricultural Product Wholesale Market. The rest of 8,379 tons was shipped to the other wholesale markets.  The situation is similar to vegetable cooperative marketing and fruit cooperative marketing getting more concentrated and is worse than vegetables in terms of market distribution and market share. 

The Government amended Agricultural Development Act (2010, 12, 8) Article 3 in February 7, 2003 to add Item 16, the definition of Cooperation Group as: An agricultural organization which is voluntarily formed and managed by farmers together whose lands are adjacent or close to each other, or managed the same type of agricultural activities. Actually, there were some Cooperation Group in agricultural production region before 2003.  Since they did not have legal positions, the Government could not support them well.  In other words, the total amount of Cooperation Group was over 6,000, forcing government to face the situation (see Table 10).

In Table 10, the number of Cooperation Group is 154 in 1991, and 6,274 in 2015.  The members of Cooperation Group are 2,682 in 1991 and 128,786 in 2015.  Even though the government amended the Agricultural Development Act in 2003, the number and members reached the top in 2005, the number 7,123 and members 132,023 respectively.  Up to now, both are kept stable on 6,112 members.  Comparing to Cooperatives, the Cooperation Group does not need to register in Ministry of the Interior but Council of Agriculture, Agriculture and Food Agency.  In Table 10, vegetables and fruits cooperation group have similar numbers and members, 2,000 in number and 40,000 in members.  One thing different is the space of cooperation group, with fruits almost needing twice the space as vegetables.

Table 10.  Cooperation group whole country, vegetables and fruits
  

Source: Agriculture and Food Agency, Council of Agriculture, Executive Yuan, Taiwan. Agricultural Cooperation Group Information Service System as http://agrpmg.afa.gov.tw/agr-Sed/agrJsp/main.jsp?page=15 


Discussion on Taiwan agricultural marketing cooperative

Market Share:

According to Table 1, vegetables and fruits joint marketing volumes are about one quarter of transaction in agricultural products wholesale markets.  The number is obtained by the following equation.


In Tables 5 and 10, farmer population of agricultural cooperatives and cooperation groups are about 8.7% of whole country farmer population, according to Taiwan Agricultural Yearbook 2013.  It is found by the following equation (2).


 

There are 799,611 hectares in Taiwan cropland according to the Taiwan Agricultural Yearbook 2013.  From Table 10, about 12.9% croplands are joined in cooperation group.  The percentage is provided by the following equation (3).

Therefore, there is quite a lot of improving space for performing cooperative agricultural marketing in Taiwan.

 

Farmer organizations and agricultural cooperatives

Farmer organizations are not necessary in agricultural cooperatives in Taiwan. Responsible government authorities for them are different, these are the Council of Agricultural and the Ministry of the Interior, respectively.  One challenge is how to perform agricultural marketing well for both of them.

Agricultural products wholesale market

Pursuant to Agricultural Products Market Transaction Act Article 25: The transaction modes of agricultural products wholesale markets are to auction, to negotiate prices, to mark the prices, to enter a bid. The supplier may specify the lowest transaction price.  Joint marketing or cooperative agricultural products suppliers prefer to ship their products to an agricultural products wholesale market with auction transaction mode.

Farmer education and training

Farmers are the most important factor in performing better agricultural marketing.  Farmers organize farmers’ associations and register as agricultural cooperatives.  Therefore, farmer education and training is very critical for making sure farmer organizations and agricultural cooperatives function well.  Therefore, the program for farmer education and training is necessary and helpful in agricultural marketing.  

REFERENCES


Agricultural Production Cooperative.
Agricultural Products Market Transaction Act (2012, 11, 28).
Agriculture and Food Agency, Council of Agriculture, Executive Yuan, Taiwan.
Agriculture and Food Agency, Council of Agriculture, Executive Yuan, Taiwan. Agricultural Cooperation Group Information Service System as http://agrpmg.afa.gov.tw/agr-Sed/agrJsp/main.jsp?page=15 
Cooperative Enterprise Yearbook, 2014.
Cooperatives Act (2011, 6, 15).
National Farmers’ Association.
Republic of China Fruit and Vegetable Cooperative.
Taiwan Agricultural Yearbook, 2014.
Taiwan Area Agricultural Products Wholesale Market Yearbook 2015.


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